The modulation of O-phosphotyrosyl-utilizing signal transduction is being addressed by site-directed inhibitors of protein-tyrosine kinases (PTKs) pathways. Three different approaches are being taken. First, compounds are directed against the catalytic site, and have been shown to be active against several PTKs, including PDGFR, EGFR, p56Lck, c-erb B2/HER2/neu and lyn. Current emphasis is on inhibitors of the bcr-abl oncogene implicated in Philadelphia chromosome positive leukemias, such as chronic myelogenous leukemia (CML). The second approach is directed against src homology region 2 (SH2) domain binding interactions. The nonhydrolyzable phosphotyrosyl (pTyr) mimetic, difluorophosphonomethyl phenylalanine (F2Pmp), has been prepared in both racemic and enantiomerically pure L- isomers, and has been incorporated into small peptides based on the binding consensus sequences of several SH2 domains, including the p85 unit of phosphatidylinositol 3-kinase (PI 3-kinase), Src, Grb 2, PLCgamma, SH- PTP2/Syp, INFgamma, p91 and ZAP-70. While being totally stable towards phosphatases, these peptides retain equivalent or enhanced SH2 binding affinity relative to their pTyr-containing prototypes. To date, cellular studies using Syp and ZAP-70 directed F2Pmp peptides have demonstrated the ability of these constructs to inhibit relevant signalling pathways. Peptidomimetics are being prepared starting with conformationally constrained cyclic peptide analogues and rigid pTyr surrogates. The third approach develops inhibitors of protein-tyrosine phosphatases (PTPs). Lead compounds are based on benzylic phosphonate and F2Pmp pharmacophores. X-Ray analysis of inhibitors bound within the active site of PTP 1B are underway, to provide the structure activity relationship (SAR) basis for the rational design of potent and selective PTP inhibitors using computer assisted molecular modeling.